May 4, 2007

State-sponsored student advice center run by Nelnet!

Posted in Student Loan News at 8:23 AM by Joe From Boston

Here’s an article from the Chronicle of higher education.  Click here to read the article about a state-sponsored student advice center being farmed out to Nelnet – a student loan company.  A paid subscription may necessary to read the article.

Rhode Island Treasurer Says Loan Authority Should Quit Letting Nelnet Employees Run Student-Advice Center


The treasurer of Rhode Island called on Thursday for the state’s nonprofit student-loan authority to end an arrangement that allows a student-loan company to run a state-supported resource center that answers questions about college admissions and financial aid.

Frank T. Caprio, who is a board member of the Rhode Island Student Loan Authority, said in a written statement that the authority should create a fire wall between its College Planning Center, which offers free advice to thousands of students each year, and Nelnet, a national student-loan company that currently provides the center’s staff through a subsidiary.

Mr. Caprio’s recommendation followed the online publication of an article by The Chronicle on Thursday that reported that the planning center’s employees work for a subsidiary of Nelnet, or the National Education Loan Network, but do not disclose their affiliation with the lender to students.

According to loan-authority documents and officials, the planning center often encourages students who ask about financial aid to take out loans through the loan authority. Nelnet is the exclusive provider of those loans, and the company gains millions of dollars annually in student-loan volume through referrals from the center, according to loan-authority estimates.

“The fact that Nelnet would be responsible for the salaries of the planning center begs the question: What kind of advice are the people who are staffing it giving to the public?” Mr. Caprio said in an interview.

The authority, a quasi-public state agency whose board is appointed by the governor, agreed to turn its lending operations and management of the planning center over to Nelnet in 2004. The authority does not receive a percentage of Nelnet’s loan volume, but as part of the 2004 agreement, Nelnet agreed to buy the state’s existing loan portfolio for $13-million and promised to donate $500,000 over 10 years to a state scholarship fund.

Mr. Caprio said the College Planning Center is well known in the state and must remain an unbiased resource. He said he plans to form a subcommittee of the loan-authority’s board that will review its agreements with Nelnet and recommend a code of conduct based on one drawn up by New York State’s attorney general, Andrew M. Cuomo, who has led investigations into the student-loan industry.

Noel Simpson, executive director of the loan authority, did not return a call for comment. In interviews earlier this week, Mr. Simpson defended the planning center’s arrangement with Nelnet. He said the center offered many types of helpful advice on subjects other than financial aid, and that the authority has no profit motive to recommend any particular loan company to students.


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